Wrap Text
Unaudited summary consolidated results for the six months ended 28 February 2017
PURPLE GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/013637/06)
Share code: PPE
ISIN: ZAE000185526
("Purple Group" or "the Company" or "the Group")
EASYEQUITIES ACCOUNTS OPENED
122% UP TO 43 710
HY 2016: 19 653
EASYEQUITIES REVENUE
117% UP TO R3.4 MILLION
HY 2016: R1.6 MILLION
CLIENT ASSETS
20% UP
R1.390 BILLION
EASYEQUITIES' PARTNER ASSETS
770% UP
R200 MILLION
HY 2016: R23.1 MILLION
ACTIVE CLIENTS
44.1% UP
UNAUDITED SUMMARY CONSOLIDATED RESULTS
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2017
CHAIRMAN'S LETTER
A weak trading performance in our core operations is further compounded by the
write-off of a legacy asset. Beyond that the group has spent a lot of money investing in
a platform for future growth.
Financial inclusion is increasingly recognised across the globe (particularly in South
Africa) not only as necessary but as the primary source of growth in asset management.
For the entry level or first time investor it's as much about incremental education as it
is about cost effective access.
Growth in client numbers and assets under management underpin the many
recognition awards that EasyEquities has received over the past years.
Of course I'm disappointed in the result, but I know how well Purple Group is positioned
for the changing, informed retail environment. I expect extraordinary growth over the
next 18 months and I have no doubt that our significant investment in technology will
pay off handsomely.
Mark Barnes
Chairman
CHIEF EXECUTIVE OFFICER'S LETTER
The evolution of the Purple Group from a little-known niche financial services provider
to a globally well-recognised disruptive Fintech group delivering on our mission, to
democratise investing for all, remains well on track.
Tough operating conditions held back the revenue of the Purple Group and with it
our ability to invest more aggressively in the opportunities that we see in, especially,
EasyEquites. This highlights the importance of delivering on our stated objective to
raise capital to better support growth as well as consider a more accommodative group
structure that better aligns the varying interests of the stakeholders of the group.
At a high level, all group businesses posted revenue for the past six months that was
in line with that generated in the second half of 2016, whilst EasyEquities continued
to double its "client opportunities" across all key performance metrics. With no
significant change in the macro environment effecting our primary sources of revenue
this was a satisfactory outcome. The write down of the Real People asset is a once off
event, whist disappointing it is a legacy of Purple Capital and a non-strategic asset of
the Purple Group.
More awards, more clients and more partnership opportunities present themselves to
the group each day and I can say with upmost confidence that the value of the group
grows in line with these metrics and not the ones lining our income statement for now.
Fintech is one of the few industries where exponential opportunities are still to be
found. It takes vision, innovation and resolute and committed stakeholders that are
brave enough to fail in order that they may succeed and build a high growth business
on solid foundations.
Such organisations are valued by their ability to double their "client opportunities"
each year by turning customers into fans and by being a multiple better, faster and
cheaper than the competition.
In the Purple Group I find all the right stuff to continue to deliver on the opportunities
before us and look forward to a very different future.
Charles Savage
Group CEO
CHIEF FINANCIAL OFFICER'S REVIEW
For the first time the respective income statements of the various Purple Group
businesses have been carved out below.
Although these businesses leverage off a centralised resource base and have varying
levels of intersection, they each target very different segments of the market and are
at different stages of the business life cycle.
GT247.com and GT Private Broking
GT247.com and GT Private Broking (GTPB) are established businesses operating
in a niche segment of the market that provides a trading destination for active OTC
derivatives traders. This market is highly competitive, however, provides healthy margins.
GT247.com & GT Private Broking
%
Operating expenses (R'000) HY 2017 HY 2016 move
Revenue 32 791 60 082 (45.4)
Trading expenses (2 266) (4 984) (54.5)
Operating expenses (27 909) (25 998) 7.3
Net income 2 616 29 100 (91.0)
Other income - 197 (100.0)
Profit before interest, depreciation 2 616 29 297 (91.1)
Interest expense (541) (266) 103.6
Depreciation and amortisation (689) (908) (24.1)
Profit before fair value, impairment 1 386 28 123 (95.1)
Fair value adjustments - - -
Guarantee adjustments - - -
Profit before tax 1 386 28 123 (95.1)
Taxation (240) (8 531) (97.2)
Profit after tax 1 146 19 592 (94.2)
Key revenue drivers
Trading activity indicator 5.9 6.0 (1.0)
Client funds (R'm) - Trading 138.2 154.8 (10.7)
Average asset management funds 339 525 532 080 (36.2)
Despite difficult trading conditions experienced over the past 12 months, this business
still managed to generate a small profit for the six months ended 28 February 2017,
even though revenue was down 45.4% compared to the comparative period in the prior
year. Revenue for the past six months is in line with that generated during the second
half of FY 2016.
The decline in revenue was primarily driven by lower client funds (10.7% down), as
trading activity was only down by 1%.
Revenue generated from asset management execution was down by 52%, compared to
the comparative period, due to a 36% decrease in average assets under administration,
coupled with the funds being conservatively positioned for the entire period under
review, limiting funding and commission revenue.
Emperor Asset Management
Emperor Asset Management is a relatively unknown alternative asset manager that
offers its 2 000+ retail clients segregated portfolios tailored to each individuals risk-
return profile.
Although Emperor has an 11-year track record of quantitative momentum-style
investing, its client offering was only launched during 2012.
As with any asset manager it will take time for this business to reach critical mass and
perhaps even attract some institutional asset flows.
The last 24 months have been extremely difficult for our momentum based strategies,
culminating in Emperor's worst year of performance since the financial crisis in 2008.
As a result, the funds experienced significant outflows over the last 12 months and did
not generate performance fees.
Emperor Asset Management (EAM)
%
Key revenue drivers HY 2017 HY 2016 move
Revenue 1 227 3 824 (67.9)
Trading expense (387) (1 013) (61.7)
Operating expenses (2 933) (2 297) 27.7
Net (loss)/income (2 093) 514 (507.8)
Other income - -
(Loss)/profit before interest, depreciation
and amortisation (2 093) 514 (507.8)
Interest expense - -
Depreciation and amortisation - -
(Loss)/profit before fair value,
impairments and guarantee adjustments (2 093) 514 (507.8)
Fair value adjustments - - -
Guarantee adjustments - - -
(Loss)/profit before tax (2 093) 514 (507.8)
Taxation 363 (156) (332.7)
(Loss)/profit after tax (1 730) 358 (583.5)
Key revenue drivers
Management fees (R'000) 1 209 2 097 (42.3)
Performance Fees (R'000) 18 1 727 (99.0)
Total revenue (R'000) 1 227 3 824 (67.9)
Client funds (R'm) 340 523 (35.0)
EasyEquities
The Group has continued to invest in its EasyEquities investment platform over the
past six months.
In the result, 43 710 accounts have been opened (an increase of 122.4% since
HY 2016), with client assets totalling R912 million (up 90.1%) and partner funds under
administration totalling R200 million (up 766.4%).
The launch of new features and products, including recurring investments and
Bundles (managed portfolios) in the past six months have started gaining traction and
adding to the revenue line.
Over the next six months we will be adding US shares to the platform and retirement
wrappers, amongst other exciting enhancements that will no doubt continue to
attract new clients and assets to the platform and bring us closer to our vision of
democratising investing for all South Africans.
In addition, we will continue to explore new partnerships and focus on delivering
innovative solutions for our current partners.
EasyEquities
Key revenue drivers HY 2017 HY 2016 % move
Revenue 3 423 1 578 116.9
Trading expense (655) (328) 99.5
Operating expenses (18 341) (12 709) 44.3
Net loss (15 573) (11 459) 35.9
Other income - -
Loss before interest, depreciation and
amortisation (15 573) (11 459) 35.9
Interest expense (1 264) (266) 375.1
Depreciation and amortisation (1 607) (907) 77.1
Loss before fair value, impairments and
guarantee adjustments (18 444) (12 632) 46.0
Fair value adjustments - - -
Guarantee adjustments - - -
Loss before tax (18 444) (12 632) 46.0
Taxation 3 200 3 832 (12.4)
Loss after tax (15 244) (8 800) 71.4
Key revenue drivers
Accounts opened 43 710 19 653 122.4
Client funds (R'm) 912 480 90.1
Partner funds (R'm) 200 23 769.6
Total funds 1 112 503 121.1
Trading expenses
Trading expenses, comprising introducing agent commissions, sales commissions
and third-party research costs decreased by 47.7% for the six months ended
28 February 2017, which is in line with the decrease in revenue.
OPERATING EXPENSES
% move
6 months
6 months ended
ended % move 31 August
Operating expenses 31 August HY 2016 2016
(R'000) HY 2016 2016 HY 2017 vs HY 2017 vs HY 2017
Employment costs 21 029 25 720 24 022 14.2 (6.6)
IT costs 7 530 9 340 8 844 17.5 (5.3)
Marketing 4 255 8 975 5 526 29.9 (38.4)
Office costs 3 534 4 058 4 160 17.7 2.5
Professional fees 1 568 3 150 2 484 58.4 (21.1)
Other 3 088 3 443 4 147 34.3 20.4
Total 41 004 54 686 49 183 19.9 (10.1)
Operating expenses
Operating expenses for the six months ended 28 February 2017 are 19.9% higher
than the comparative period, however, are 10.1% lower than the six months ended
31 August 2016.
Net interest expense
The increase in the interest expense is due to an increased utilisation of overdraft
facilities to fund the continued growth of the EasyEquities business.
Depreciation and amortisation
Depreciation and amortisation costs increased due to various new product
development costs being capitalised during the year, mainly comprising software
development expenses in respect of the EasyEquities platform.
Fair value and impairment adjustment
Purple Group part-funded a BEE transaction in Real People Investment Holdings
Limited ("RPIH") back in 2007, through an empowerment vehicle, Blockbuster Trading
3 Pty Ltd ("BBT"). Subsequent to this and as announced on SENS on 15 December
2014, Purple Group made a direct investment in RPIH during January 2015 (in order
to off-set the dilution of Purple Group's investment in RPIH through BBT) through
participating in a RPIH capital raise, concluded at a significant discount to net asset value.
In the result Purple Group holds an indirect investment in RPIH through BBT. BBT,
of which Purple Group owns a 37.5% shareholding, holds 10 843 ordinary shares in
RPIH. In respect of Purple Group's indirect investment in RPIH held through BBT, the
shareholders of BBT granted the Industrial Development Corporation ("IDC"), (which
funded the transaction) a put option, on a joint and several basis, whereby the IDC may
put any unredeemed preference shares (as at 1 September 2017) to the shareholders
of BBT at the subscription price.
In addition, Purple Group holds a direct investment in RPIH comprising 6 471
ordinary shares, 6 089 compulsory convertible preference shares and 892 cumulative
redeemable preference shares.
The net carrying value of this investment at 31 August 2016 was R27.4 million
comprising the fair value of the investment, less the financial guarantee raised.
RPIH is currently raising capital and restructuring its debt to ensure that RPIH meets
its debt covenants. It would appear from discussions with management of RPIH that
existing shareholders of RPIH, of which BBT and Purple Group are two, could be
diluted (perhaps even down to zero) if unable to participate in the capital raising that
is currently underway.
Purple Group has no further appetite to invest capital into RPIH and has thus provided
100% against its ordinary shares and compulsory convertible preference shares held
directly and indirectly in RPIH and retained the redeemable preference shares at their
face value of R12.2 million.
In addition, Purple Group has raised a Financial Guarantee provision for its share of
the debt owed to the IDC, totalling R26.9 million.
In the result, a total write-down of R42.9 million before tax and R33.3 million after tax
has been included in the results for the six months ended 28 February 2017.
Current and deferred tax
The tax credit of R12.9 million for HY 2017 mainly comprises the fair value adjustment
of RPIH.
Profit for the period
Basic earnings and headline earnings per share for HY 2017, have decreased from a
profit of 1.29 cents in HY 2016 to a loss of (5.52) cents per share for HY 2017.
Summarised Consolidated Statement of Financial Position
Non-current assets decreased by R28.9 million during HY 2017, mainly comprising the
write-down of Purple Group's direct investment in RPIH.
The equity attributable to owners decreased by R24.1 million during HY 2017 due to the
losses realised of R48.2 million which was partially off-set by capital raised during the
period, totalling R20.5 million.
Gary van Dyk
Chief Financial and Operations Officer
OPERATING SEGMENTS
The operating segments are distinguished by the type of business and the management team
responsible for the business unit. The Group comprises the following operating segments:
- EasyEquities: Online investment platform
- GT247.com & GT Private Broking: Online derivatives trading platforms, offering a private client
service through GT Private Broking (GTPB)
- Emperor Asset Management (EAM): Asset management operations of the Group offering segregated
portfolios, unit trusts and a hedge fund.
- Investments: Fees and dividends earned on non-core investments and fair value adjustments made
against them.
- Purple Group: Purple Group is the listed holding company.
EasyEquities,
GT247.com,
GTPB and Purple
EAM group Investments Total
R'000 R'000 R'000 R'000
As at 28 February 2017
Segment asset
Non-current assets 24 703 243 380 12 208 280 291
Current assets 127 568 867 5 785 134 220
Total assets 152 271 244 247 17 993 414 511
Segment liabilities
Non-current liabilities - - (26 887) (26 887)
Current liabilities (134 882) (13 477) - (148 359)
Total liabilities (134 882) (13 477) (26 887) (175 246)
There are no unallocated amounts
Easy GT247.com
Equities & GTPB EAM Investments Total
R'000 R'000 R'000 R'000 R'000
For the six months ended
28 February 2017
Revenue 3 423 32 791 1 227 - 37 441
Trading expenses (655) (2 266) (387) - (3 308)
Operating expenses* (18 341) (27 909) (2 933) - (49 183)
Net (loss)/income (15 573) 2 616 (2 093) - (15 050)
Other income - - - 903 903
(Loss)/profit before interest,
depreciation and amortisation (15 573) 2 616 (2 093) 903 (14 147)
Interest expense (1 264) (541) - - (1 805)
Depreciation and amortisation (1 607) (689) - - (2 296)
(Loss)/profit before fair value,
impairments and guaranteed
adjustments (18 444) 1 386 (2 093) 903 (18 248)
Fair value adjustments - - - (47 113) (47 113)
Guarantee adjustments - - - 4 171 4 171
(Loss)/profit before tax (18 444) 1 386 (2 093) (42 039) (61 190)
Current and deferred tax 3 200 (240) 363 9 619 12 942
(Loss)/profit after tax (15 244) 1 146 (1 730) (32 420) (48 248)
* Share-based payment expense of R3 024 612 is included in operating expenses. The split per segment
is as follows:
- EasyEquities R1 117 189
- GT247.com + GTPB R1 719 711
- EAM: R187 712
Easy GT247.com
Equities & GTPB EAM Investments Total
R'000 R'000 R'000 R'000 R'000
For the six months ended
29 February 2016
Revenue 1 578 60 082 3 824 - 65 484
Trading expenses (328) (4 984) (1 013) - (6 325)
Operating expenses (12 709) (25 998) (2 297) - (41 004)
Net (loss)/income (11 459) 29 100 514 - 18 155
Other income - 197 - - 197
(Loss)/profit before interest,
depreciation and amortisation (11 459) 29 297 514 - 18 352
Interest expense (266) (266) - - (532)
Depreciation and amortisation (907) (908) - - (1 815)
(Loss)/profit before fair value,
impairments and guaranteed
adjustments (12 632) 28 123 514 - (16 005)
Fair value adjustments - - - - -
Guarantee adjustments - - - - -
(Loss)/profit before tax (12 632) 28 123 514 - (16 005)
Current and deferred tax 3 832 (8 531) (156) - (4 855)
(Loss)/profit after tax (8 800) 19 592 358 - 11 150
* Share-based payment expense of R1 770 000 is included in operating expenses. The split per segment
is as follows:
- EasyEquities R531 000
- GT247.com + GTPB R1 129 260
- EAM: R109 740
SUBSEQUENT EVENTS
The directors are not aware of any other matter or circumstances arising since 28 February 2017 up to
the date of this announcement, not otherwise dealt with in this announcement.
Basis of preparation of the unaudited results
The unaudited condensed Group interim financial statements are prepared in accordance with the
recognition and measurement requirements of International Financial Reporting Standards ("IFRS"),
the presentation and disclosure requirements of IAS 34 - Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council, the Listings Requirements of
the JSE Limited and in the manner required by the South African Companies Act, 71 of 2008.
This announcement does not include the information required pursuant to paragraph 16A(j) of IAS 34,
however, the areas that include significant judgements made by management in applying the Group's
accounting policies and key sources of estimation uncertainty were the same
as those that were identified in the audited consolidated annual financial
statements as at and for the year ended 31 August 2016, and which are available
on the Company's website, at its registered office and upon request.
Accounting policies which comply with IFRS have been applied consistently by
all entities in the Group and are consistent with those applied in the previous
financial year. The preparation of these unaudited condensed Group interim
financial statements for the six months ended 28 February 2017 was supervised
by the Financial Director, Gary van Dyk CA (SA).
Any forward-looking statements contained in this announcement have not been
reviewed or reported on by the Company's auditors.
The directors take full responsibility for the preparation of the unaudited
consolidated results for the six months ended 28 February 2017.
On behalf of the board
Mark Barnes (Non-Executive Chairman)
Charles Savage (Chief Executive Officer)
Gary van Dyk (Chief Financial and Operations Officer)
Johannesburg
24 April 2017
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
for the six months ended 28 February 2017
Unaudited Unaudited Audited
six months six months 12 months
28 February 29 February 31 August
2017 2016 2016
R'000 R'000 R'000
ASSETS
Equipment 3 327 4 336 4 003
Intangible assets and goodwill 220 785 210 889 216 137
Other investments 12 208 57 664 58 418
Other financial assets 906 932 954
Deferred tax assets 41 119 27 846 29 725
Total non-current assets 278 345 301 667 309 237
Trade and other receivables 8 567 11 112 8 429
Tax receivable 4 227 - 2 490
Other investments 5 785 6 348 5 938
Other financial assets 1 946 1 834 1 749
Cash and cash equivalents 115 641 100 624 143 839
Total current assets 136 166 119 918 162 445
Total assets 414 511 421 585 471 682
EQUITY AND LIABILITIES
Share capital and premium 477 187 451 769 456 669
Accumulated loss (263 892) (203 434) (215 644)
Other reserves 25 970 20 120 22 358
Equity attributable to owners 239 265 268 455 263 383
Financial guarantee 26 887 31 058 31 058
Total non-current liabilities 26 887 31 058 31 058
Bank overdraft 12 798 9 147 12 172
Tax payable - 1 621 -
Trade and other payables 135 561 111 304 165 069
Total current liabilities 148 359 122 072 177 241
Total equity and liabilities 414 511 421 585 671 682
Net asset value per ordinary share
(cents) 26.05 31.06 29.88
CONDENSED GROUP STATEMENT OF PROFIT OR LOSS
for the six months ended 28 February 2017
Change Unaudited Unaudited Audited
2016 six months six months 12 months
to 28 February 29 February 31 August
2017 2017 2016 2016
% R'000 R'000 R'000
Revenue (43) 37 441 65 484 105 811
Trading expenses (48) (3 308) (6 325) (9 747)
Operating expenses 20 (49 183) (41 004) (95 690)
Net (loss)/income (183) (15 050) 18 155 374
Other income 358 903 197 952
Earnings before interest,
depreciation and
amortisation (177) (14 147) 18 352 1 326
Interest income - - -
Interest expense 239 (1 805) (532) (2 176)
Depreciation
and amortisation 26 (2 296) (1 815) (2 871)
(Loss)/profit before
fair value, impairment
adjustments and tax (214) (18 248) 16 005 (3 721)
Fair value and impairment
adjustments (42 942) - -
(Loss)/profit before tax (482) (61 190) 16 005 (3 721)
Current and deferred tax 12 942 (4 855) 531
(Loss)/profit after tax (533) (48 248) 11 150 (3 190)
Change Unaudited Unaudited Audited
2016 six months six months 12 months
to 28 February 29 February 31 August
2017 2017 2016 2016
% R'000 R'000 R'000
Profit/(loss) attributable to:
Owners of the company (48 248) 11 150 (3 190)
Non-controlling interest - - -
(48 248) 11 150 (3 190)
Weighted number of shares
in issue at end of period ('000) 873 390 861 282 863 492
Earnings per share
Basic (loss)/profit per share
(cents) (427.9) (5.52) 1.29 (0.37)
Diluted (loss)/profit per share
(cents) (432.0) (5.27) 1.22 (0.35)
Headline profit/(loss)
per share
(Loss)/profit for the period (432.7) (48 248) 11 150 (3 189)
Headline (loss)/profit
for the period (432.7) (48 248) 11 150 (3 189)
Headline (loss)/profit
per share (cents) (427.9) (5.52) 1.29 (0.37)
Diluted headline (loss)/profit
per share (cents) (432.0) (5.27) 1.22 (0.35)
GROUP STATEMENT OF OTHER COMPREHENSIVE INCOME
for the six months ended 28 February 2017
Unaudited Unaudited Audited
six months six months 12 months
28 February 29 February 31 August
2017 2016 2016
R'000 R'000 R'000
(Loss)/profit for the period (48 248) 11 150 (3 190)
Other comprehensive income
Items that may be reclassified
subsequently to profit/loss
Foreign currency translation reserve 587 (31) 1 494
Total other comprehensive income/
(loss) 587 (31) 1 494
Total comprehensive (loss)/profit (47 661) 11 119 (1 696)
Total comprehensive (loss)/profit
attributable to:
Owners of the Company (47 661) 11 119 (1 696)
Non-controlling interest - - -
(47 661) 11 119 (1 696)
CONDENSED GROUP STATEMENT OF CASH FLOWS
for the six months ended 28 February 2017
Unaudited Unaudited Audited
six months six months 12 months
28 February 29 February 31 August
2017 2016 2016
R'000 R'000 R'000
Cash flow utilised
by operating activities (42 324) (156 498) (131 110)
Cash flow utilised
in investing activities (7 018) (4 575) (11 113)
Cash flow generated/(utilised)
in financing activities 20 518 (9 951) 11 389
Net decrease in cash and cash
equivalents (28 824) (171 024) (130 834)
Cash and cash equivalents
at the beginning of the period 131 667 262 501 262 501
Cash and cash equivalents
at the end of the period 102 843 91 477 131 667
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 28 February 2017
Unaudited Unaudited Audited
six months six months 12 months
28 February 29 February 31 August
2017 2016 2016
R'000 R'000 R'000
Balance at beginning of the period 263 383 265 517 265 517
Shares issued 20 518 857 11 144
(Loss)/profit for the period (48 248) 11 150 (3 190)
Share-based payments 3 025 1 770 4 858
Foreign currency translation reserve 587 (31) 1 494
Dividend payment - - -
Capital distribution - (10 808) (16 440)
239 265 268 455 263 383
Registered office
Block B, The Offices of Hyde Park, Strouthos Place, Hyde Park, 2196
Independent auditors
BDO South Africa Incorporated
Chartered Accountants (SA)
Registered Auditors
22 Wellington Road, Parktown, 2193, Private Bag X60500, Houghton, 2041
Group secretary
Trifecta Statutory and Governance Services, a division of Trifecta Capital Services Proprietary Limited
31 Beacon Road, Florida North, 1709
Sponsor
Deloitte & Touche Sponsor Services Proprietary Limited
Building 8, Deloitte Place, The Woodlands, 20 Woodlands Drive, Woodmead, 2196
Private Bag X6, Gallo Manor, 2052
Directors
Mark Barnes Non-executive Chairman
Charles Savage Chief Executive Officer
Gary van Dyk Chief Financial and Operations Officer
Dennis Alter Independent Non-executive Director
Craig Carter Independent Non-executive Director
Ronnie Lubner Non-executive Director
These unaudited results are available on the Company's website:
www.purplegroup.co.za
Date: 24/04/2017 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
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